Inside Sofia Vergara's Multi-Million Dollar Empire

Television's highest-paid actress, Sofia Vergara is also a savvy businesswoman who created a multimillion-dollar media empire through Latin World Entertainment, the company she cofounded with Luis Balaguer in 1998.

You may not have heard of LatinWe (Latin World Entertainment Holdings Inc.) but the multiservice talent management, marketing, production, endorsement and licensing firm has become the go-to destination for Hollywood producers to search for Latino talent, pitch Latino-themed projects and get advice on how to reach Hispanics.

The company, founded by Sofía Vergara and former music promoter Luis Balaguer, has become an influential Hollywood player and a financial powerhouse. Balaguer, LatinWE's chief executive officer, didn't want to reveal its 2011 revenues but conceded that Forbes magazine's recent estimate of $27 million was "impressively close." A great portion of those revenues is built on the successful marketing of Vergara.

SUCCESS IN SPANISH

When Vergara arrived in the United States in 1995, she was an unknown model from Barranquilla, Colombia. She quickly gained popularity on Spanish-language television as the co-host of Univision travel show Fuera de Serie but got no recognition from English-language audiences. A combination of luck, timing, vision and the right partner changed her fortune.

She realized early on that there was a need for good agents and managers to represent Hispanic talent. "Most stars had brothers, aunts or boyfriends managing their careers. Few had their contracts revised by entertainment lawyers. No one was thinking really big on opportunities related to entertainment in our market and how to cross over," she says. "So when I met Luis, his vision on how the opportunities could be handled and his big plans to capitalize on any chance to grow, aligned with mine and we started this adventure."

LatinWE is not just her company, it also represents her as an actress and model, with Balaguer managing her professional interests as well as overseeing all aspects of the company. Vergara's estimated earnings between May 2011 and May 2012 are $19 million, including her Modern Family salary, endorsements (she has done ad campaigns for Diet Pepsi, Burger King and Covergirl) and a lucrative licensing deal with Kmart, which now sells a product line with her name.

HOW IT ALL STARTED

Vergara and Balaguer met in 1996 through a common friend. Right away they hit it off. Starting out as a talent management agency, the first project was a calendar featuring Vergara. "We couldn't print the calendars fast enough to meet the demand," says Balaguer. "I see opportunities everywhere," says Vergara. "When I realized 20 years ago I could sell a lot of magazines in Colombia by being on the covers, I immediately felt I could sell my own calendars, endorse brands and have my own products in the U.S. and around the world with the right partners…and I just went for it." Balaguer says the 2000 census gave advertisers the first peek into the growing Hispanic purchasing power. So when Vergara scored a small part—as a Mexican housemaid, no less—in the 2002 movie Big Trouble, he convinced producer Barry Josephson to let LatinWE market the movie to Hispanics. "I told him we could promote his movie in a way that had never been done before in the Latino market. We were able to sign Disney for that movie and then they ended up giving us all their movies. We later signed Universal pictures, Sony Pictures, Paramount, New Line and Summit."

Soon after, Balaguer realized "no one was using Latino stars to endorse their products." He created an endorsement division, helping Vergara bag the first endorsement with Bally's Fitness and score deals for other Univision talent. "For the last seven years, our endorsement division does 87 percent of all endorsements in Spanish in the United States, even with stars that are not exclusive to LatinWE. We became the company to go to for endorsements."

LOGICAL SUCCESSIONS

Balaguer explains the company's growth has been a series of "logical successions." Talent management led to marketing, which paved the way to licensing and then endorsements. With a portfolio of talent, he says it made sense to start a production company and generate their own content. His wife, former Univision producer Melissa Escobar, is the president of LatinWE Productions and manages their YouTube channel www.NuevOn.com. The division has produced specials for Univision, Viva Hollywood for VH1, partnered with Disney Latin America to executive-produce two seasons of Desperate Housewives in Argentina and produced a season of Golden Girls for Spain. Headquartered in Miami with offices in Los Angeles, LatinWE has developed a successful, self-sustaining business environment. All the different divisions, Latin We Management LLC, Latin We Marketing and Promotions LLC and Latin We Ventures LLC, are independent subsidiaries owned by LatinWE Holdings.

It's all about the people, insists Balaguer. "No one knows it all and a big chunk of my knowledge comes from the people I surround myself with. I was very careful in selecting the people I expose our talent to and that will help them in their careers. I knew we had to invest heavily in top executives to succeed."

Balaguer hired top-level attorneys to review talent contracts and endorsement deals and brought in executive talent such as Paul Robb, former CEO of Lifestyle Design Group and cofounder of LatinWE's licensing division, Nancy Overfield-Delmar, once senior VP of 20th Century Fox Licensing, and Michael Wolfson, ex-chief creative officer of AOL.

According to Balaguer, management, endorsements and licensing are LatinWE's biggest revenue generators. He points out Overfield-Delmar's arrival to the company accelerated their licensing success, with the first Kmart deal signed in less than a year. "We started with four and now have 29 categories. We're no longer just clothing. We're eyeglasses, jewelry, luggage and we're now moving into furniture and taking the line internationally," says Balaguer, who stresses that Vergara's hands-on approach makes her the "leader" of that company. "She's involved with design, quality, pricing, how she wants it to be marketed."

"I love it. It doesn't feel like work for me," says Vergara.

SOCIAL MEDIA LANDSCAPE

On April 15, LatinWE launched YouTube channel NuevOn.com with a $5 million advance from Google Inc., YouTube's parent company. Last year, Google announced it would partner with media companies, Hollywood producers and online-video creators to create about 100 online video "channels" involving celebrities in an effort to turn YouTube into a next-generation video provider. Procter & Gamble bought 100 percent of the inventory until 2013, says Balaguer. "Our YouTube channel has been lucrative from day one."

LatinWE owns NuevOn.com in partnership with former NBC Entertainment co-chairman Ben Silverman's multimedia studio Electus, which co-produces programming of the online video channel. The lineup includes a behind-the-scenes look at Vergara's Hollywood lifestyle documented by her son, Manolo, and a reality breakdancing competition created by actor Wilmer Valderrama. But these online shows have barely generated any traffic. The biggest surprise has been Colibritany—a young Mexican portraying a girl who tapes a weekly video blog from her bedroom, sharing preparations for her quinceañera. Her video Mi Sexy Chambelán pulled a record 1 million views in less than a week and more than 8 million views in August, turning her into an online phenomenon. "We couldn't believe it. She has gotten even more views than Sofía," exclaims Balaguer. "This goes to show that what works on TV doesn't necessarily work online. We're incubating stars of the online future through YouTube."

THE FUTURE: NUEVOMALL.COM

Vergara has more than 2.7 million Twitter followers. Combined with other LatinWE stars and partners, Balaguer says they reach about 40 million fans via social media. Sensing an untapped revenue source in the making, he conceptualized a new social media platform called NuevoMall.com.

"NuevoMall.com uses every single company under LatinWE Holdings in order to generate great exclusive content to our fans through social media and also bring our advertising partners into leveraging this content and generating sales," he explains. The idea: Celebrities with a huge number of followers leverage their social media reach by making product recommendations. When a follower clicks on the link and purchases any of the pitched products, the celebrity gets affiliate fees through Nuevo Mall.

"We created a brand-new revenue stream for all talent...to monetize their social media presence," says Balaguer. "Instead of a company paying Raul de Molina $1 million to endorse them, they're paying him an affiliate fee for every product that he sells for them," he adds. "We don't need to own warehouses…do fulfillment, charge or collect monies. All we do is send the customer from our site to theirs. He buys from them, they do the fulfillment, get paid and then we get our affiliate fee."
Technically, Nuevo Mall is a separate company from LatinWE, whose holding company is El Aeropuerto LLC. Balaguer is the primary investor/owner of the digital media venture, with Vergara and Robb as the other stakeholders. It also signed a strategic partnership with Univision Communications Inc. The yet-to-be launched digital platform will feature celebrities including Vergara, singer Ricardo Montaner and actor Cristián de la Fuente, as well as Univision talent.

"Univision is a perfect partner for Nuevo Mall," says Vergara. "We hope fans and advertisers enjoy this unique opportunity to celebrate our community with the trends, products and experiences that unite us all."

ATTRACTING FUNDING

In August, Balaguer raised more than $10 million in the first round of venture capital funding for Nuevo Mall from investors Li & Fung and Regatta USA, which had previously partnered with LatinWE to develop Vergara's Kmart line. Balaguer affirms NuevoMall.com, set to launch in November, currently has a $40 million valuation.

But will it take off? "My experience has been that the success of measurement is the longevity and relevance of your project and how it evolves and stays connected to your consumer and community you're serving," says Robb, its CEO. "We will know very rapidly how successful it is by how we incentivize our fans."

Balaguer is firm in his positive outlook of the new venture: "I foresee Nuevo Mall is going to revolutionize the way we experience talent's social media and online shopping...This is a new world."

This post appears as part of a joint partnership with Poder Magazine. The article originally appeared in print and at poder360.com.